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4 - Unit 4: Monetary & Fiscal Policy and Taxes (FCHS 2024) Flashcards | StudBud
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4 - Unit 4: Monetary & Fiscal Policy and Taxes (FCHS 2024)
4 - Unit 4: Monetary & Fiscal Policy and Taxes (FCHS 2024)
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Monetary & Fiscal Policy Taxes
Flashcards
37 cards
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Questions
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Answers
1
All banks are required to
report every loan to the Fed.
be holding companies.
maintain reserves against deposits.
loan out all customer deposits.
2
The gasoline tax is based on the __________ principle of taxation.
graduated
ability-to-pay
excise
benefit
3
Which of these is MOST LIKELY to occur after the government increases taxes?
Annual deficits increase.
Consumer spending decreases.
Government programs decrease.
The national debt increases.
4
What would MOST LIKELY happen if the Federal Reserve System lowered interest rates?
Unemployment would be reduced in the short run.
The demand for goods would decrease in the short run.
Trade would increase over the long run.
The price of goods would remain stable over the long run.
5
Tightening the money supply causes interest rates to
decrease
increase
fluctuate
stabilize
6
How might monetary policy be used to combat inflation fears? The Federal Reserve might
lower interest rates.
raise interest rates.
raise taxes.
lower taxes.
7
One of the most important ways local governments raise revenue is through
property taxes.
business licenses.
income taxes
driver’s license fees.
8
How will a contractionary fiscal policy affect a budget deficit?
not affect it
grow the deficit
change monetary policy
shrink the deficit
9
The economy is experiencing rapid inflation, pushing above 9%. Which fiscal policy?
Raise taxes
Increase Spending
Increase reserve requirements
Decrease Interest Rates
10
Which of the following involves the gov't buying and selling securities in financial markets?
Interest on required and excess reserves
Reserve requirements
Discount rate
Open market operations
11
If the Fed reduces the money supply, which of the following would be true?
It will stimulate the economy
The fed must have lowered the discount rate
Interest rates will increase
The Fed must have sold bonds
12
The interest the Fed charges on loans to financial institutions.
discount rate
reserve requirements
open market operations
interest on required & excess reserves
13
What type of tax does the state place on your wages?
customs & duties
income tax
sin tax
sales tax
14
Which of the following is an example of money serving as a medium of exchange?
Richard puts money into a piggy bank.
Marian buys a carbo-loaded drink before a marathon.
Sean determines that both a book and chicken cost $5.
Ellen deposits cash into a money market account.
15
Taxes can have all of the following economic effects EXCEPT
decreasing productivity and growth.
altering resource allocation.
changing people’s buying behavior.
removing sources of revenue.
16
Why does the United States use the ability to pay principle?
It is easy to figure out
People complain less about the taxes they pay.
People should pay for the services they receive.
It is easy to hide the true tax rate.
17
FICA includes taxes to pay for
Social Security and Unemployment
Medicare and Workers’ Compensation
Unemployment and Medicare
Social Security and Medicare
18
This is where the government spends more than it takes in for the year.
budget deficit
balanced budget amendment
federal budget
national debt
19
Which type of tax would a company have to pay if it bought its products from a foreign country?
excise tax
payroll tax
customs & duties
estate tax
20
What will increased budget surpluses do to the national debt?
grow the debt
not affect it
change monetary policy
shrink the debt
21
process by which the gov't manages spending & taxes to influence the direction of the economy
fiscal policy.
tax policy.
monetary policy.
trade policy.
22
The economy is experiencing negative GDP growth and high unemployment. Which fiscal policy?
Raise taxes
Decrease Interest Rates
Increase Spending
Increase reserve requirements
23
A tax placed on cigarettes if the gov't wanted to discourage people from smoking?
sin tax
customs & duties
income tax
sales tax
24
money has to provide a way of converting goods & services into an easily storable form
measure of value
medium of exchange
limited availability
store of value
25
group in Federal Reserve determines growth of the money supply & the level of interest rates
Fed. advisory council
Fed. security council
Fed. open market committee
Board of governors
26
When the Federal Reserve buys securities on the open market, they are hoping to
reduce amount of $ banks are required to hold in reserves.
shrink the money supply and discourage inflation.
expand the money supply and increase GDP.
increase interest rates which will then increase GDP.
27
The total amount of money borrowed over time by the government.
national debt
budget deficit
balanced budget amendment
federal budget
28
How does a monetary policy of low interest rates affect consumers?
It lowers the cost of imports.
It promotes deflation.
It lowers savings rates.
It lowers spending rates.
29
All of the following are effects of the federal debt EXCEPT
interest rates are lowered.
income distribution is altered.
incentives to work, save, and invest are decreased.
purchasing power is transferred.
30
The benefit principle of taxation states that
those who benefit from gov't services should pay for them.
people should be taxed according to their ability to pay.
gov't should assess taxes only if there is a clear benefit
taxes benefit the economy as a whole.
31
This type of money exists because the government says it is money.
Barter
Fiat money
Commodity money
Gold standard
32
The Federal Reserve System might try to expand Aggregate Demand by
increasing taxes.
buying more government bonds
increasing the reserve requirement.
increasing the discount rate.
33
Which statement is MOST LIKELY true if the Fed incr the reserve requirement & discount rate?
they are trying to limit inflationary pressures
the economy is in a trough
there has been a recent increase in taxes
loans are difficult to get because little $ is circulating
34
Which fiscal policy would be most appropriate to use to get out of the recession?
raise the reserve requirement
buy bonds on the open market
decrease gov't spending
decrease taxes
35
Federal Reserve wants to increase the money supply in United States. What is it likely to do?
increase the reserve requirement for banks
reduce the discount rate
require banks to hold a reserve for all types of deposits
sell securities on the open market
36
Taxes adversely affect the allocation of resources in society because
the taxes collected are not enough to finance gov't.
they do not always fall more heavily on the rich.
not everyone pays taxes.
the gov't not the market decides how the money is spent.
37
Fearing a recession, gov't decides to give a tax rebate to buy Christmas gifts. What happens?
lower rates of inflation
higher interest rates
higher rates of inflation
lower interest rates
